Lahore, June 28, 2019 (PPI-OT): The ratings reflect modest business profile of C.A. Textile Mills (Pvt.) Limited (C.A. Textile), which improved slightly in harmonization with textile industry. Revenues have started to pick up, benefiting from increase in local sales volumes on the back of recently completed expansion. However, the profitability of the company remains thin as it has lower margins compared to peers. The Company caters to the needs of local industry and has introduced new products including viscose yarn.

The withdrawal of zero rated status of textile industry in Finance Bill 2020 coupled with increasing interest rates may put pressure on margins and liquidity across the industry. On standalone basis, the rupee devaluation and rising interest rates will put further pressure on the Company’s margins, as C.A Textile is a net importer. The assigned rating is derived from a low leveraged capital structure and strong coverages.

The ratings are dependent on the Company’s ability to improve its margins and maintain prudent working capital and financial profile. Any negative movement in margins affecting the profitability and cash flows will impact the ratings. Meanwhile, improvement in profitability and governance framework will be favourable for the ratings.